Squamous differentiation is a multi-stage process that occurs in many tissues. Environmental insults can have a dramatic impact on the control of growth and differentiation. The molecular link between control of growth arrest and differentiation is being studied. Several different signaling pathways can induce squamous differentiation including those initiated by interferon g and phorbol esters. We demonstrated that keratinocytes become growth arrested at specific point in G1 of the cell cycle. This is accompanied by inhibition of Rb phosphorylation, decrease in cdk activity and induction of the cdk- inhibitors p27, p21 and p16. Although ectopic expression of p21 or p27 causes growth arrest, cells do not differentiate suggesting that additional signals are involved in terminal differentiation. Carcinoma cells are resistant to terminal differentiation and changes in growth- regulatory genes and induction of squamous-specific genes were not observed. We have identified and cloned several genes that are regulated during squamous differentiation, including transglutaminase type I (TGase I) and a membrane protein CL-20/EMP-1. To study the transcriptional regulation of these genes, we cloned the upstream regulatory region of TGase I and CL20, and determined by footprinting, deletion mutation and mobility shift assays DNA elements that CREB/AP- 1-like sites are important in their transcriptional control. The 2.9kb upstream regulatory region of the TGase I gene to control the expression of a chloramphenicol acetyltransferase (CAT) reporter gene was also analyzed in vivo. These studies showed that the -2.9kb promoter region contains all the information for the proper issue- and differentiation-specific expression of TGase I. These results suggest that the p38 MAPK signaling pathway controls COX-2 at the level of mRNA stability while the ERK signaling pathway regulates COX-2 at the level of transcription. In contrast to NHEK, IFN-g or TGFa are not very effective in inducing TGFa or COX-2 expression in several squamous carcinoma cell lines indicating alterations in both IFN-g and TGFa response pathways. The induction of TGFa by IFN-g and the subsequent increase in PGE2 generate important signals involved in triggering the hyperproliferative transformation associated with many inflammatory diseases in the skin. - trachea, skin, growth control, squamous differentiation, gene regulation, transglutaminase, retinoic acid, interferon